Cookin' Up More Mexican Trade

ByDiana Lady Dougan, Ambassador Diana Lady Dougan is director of international communications policy studies at the Center for Strategic and International Studies. She returned recently from a US Council of American Ambassadors mission to Mexico.June 4, 1991

THE Bush administration's negotiations on a free-trade agreement with Mexico have turned into a "three-alarm chili" cook-off. Fear of losing American jobs to Mexico is the No. 1 "alarm" ingredient, followed by environmental concerns. Added is a potpourri of human rights issues (especially poor wages and working conditions for Mexican workers) mixed with protectionism and discrimination.

Before voters on both sides of the border get political indigestion, let's look at a few points.

Yes, the environment is an issue. One thing is sure, though: The Mexicans aren't going to do much to clean up the common backyard if they are broke. In fact, Mexico won't be a very good neighbor in general if it's broke.

Some American jobs will undoubtedly be lost to Mexico in the short term. Most, however, will be jobs that would otherwise have gone to Taiwan, Thailand, Malaysia, and other countries that have lower-paid work forces and lower standards of living than in the US. And unlike people in those other low-wage countries, Mexicans buy 70 percent of their imports from their northern neighbor. The more money the Mexicans have, the more they can spend on US imports.

It may surprise jingoistic Americans, but most foreigners, given the choice and the opportunity, would prefer to live in their own country. But people who are broke, who don't have jobs or a democratic-leaning government, will overcome their natural desire to stay home. No immigration restriction can do much to "save jobs for Americans" if Mexico is economically and politically unstable. Mexico's President Salinas de Gortari put it most succinctly when he said, "We want to export products, not people."

When Mexico first became serious about becoming a member of the global trading framework called the General Agreement on Tariffs and Trade (GATT), it had a long way to go to meet the minimum ground rules. The first Mexican finance minister who even suggested that Mexico join GATT was summarily fired. When Mexico became a GATT member in 1986, it not only brought down its import tariffs from over 100 percent on many items to the 50 percent required for GATT membership, it did considerably more. Since joi n

ing GATT, Mexico has voluntarily reduced its overall import tariffs to an average of 10 percent, less than many of the top industrialized countries. In a free-trade agreement with the US, trade tariffs and other impediments would be reduced even further.

President Salinas has already demonstrated that he can and will deliver on a more liberal trade relationship with the US. A number of tariff cuts already have turned into dramatic market openings for the US. For example, the traditional 100 percent tariff on imported chocolate, which long kept Mexican confectioners in "candy heaven," has now been reduced to 20 percent. Within months, Carlos V chocolates (Fabrica de Chocolates La Azteca) lost its 50-year monopoly on Mexico's sweet tooth. Today, 18 months

after the tariff reduction, US-manufactured Milky Ways and Mars Bars are taking over Mexico. Meanwhile, the Mexican consumer is winning too because Carlos V manufacturers are literally stirring up new recipes with improved quality and more efficient production in order to compete.

There are plenty of poorly defined ingredients and untested recipes in any potential free-trade agreement. In the US FTA with Canada, a number of issues remained unresolved despite (or in some instances because of) the two countries' similarities in political and economic cultures. Potentially, Washington has much more to negotiate in developing a free-trade relationship with a country such as Mexico, whose work force and resources don't essentially replicate its neighbor's in microcosm. The success of m

uch of the maquiladora program of joint manufacturing between the US and Mexico demonstrates how each country can gain from the other's strengths.

The Mexicans have elected an unabashedly pro-US president in Mr. Salinas. He has boldly set goals and made dramatic progress in turning his country away from the third-world orientation that has plagued Mexico for decades. And Mexicans seem to have learned their lesson from those brief halcyon days when they thought oil could answer their economic prayers and fund massive and chronically inefficient state-owned enterprises and social assistance programs.

The recent privatization of many state-owned enterprises is already making positive changes in the Mexican economy. Now that they are out from under government-controlled ownership, both Aero Mexico and Mexicana Airlines are becoming profitable and efficient. The first phase of the privatization of TELMEX, Mexico's infamous "non-phone" company, is already a winner on the stock market. The partnership between Southwestern Bell, France Telecom, and Mexico's savvy Grupo Corso seems to be bringing the kind o

f new vitality of international resources and expertise that will be a hallmark of the 1990s.

If the North American free-trade negotiations aren't successful, the kitchen won't close on US-Mexican relations. But there will be a lot more than egg and salsa on political faces. Let's not turn our backs on this unique opportunity for two neighbors to combine recipes for economic cooperation.